The AAT has ruled that an early retirement pension that a resident taxpayer received from the World Bank in the 2009 and 2010 income years in connection with his employment with the bank as a sanitary engineer between 1993 and 2007 was exempt from Australian income tax.
The taxpayer argued that the pension, in view of its payment on early retirement, was in the nature of payments arising from an “office” or “employment” and that it was to be properly characterised as an “emolument” (being a reward or remuneration) and, therefore, was exempt from tax in accordance with the International Organisation (Privileges and Immunities) Act 1963 (the Act) – in the same way that his salary from the bank was exempt from tax.
On the other hand, the Commissioner argued that the pension payments were not directly linked to the value of the taxpayer’s contributions to the relevant fund and that they were not payments in the nature of deferred “salary” or “emoluments” arising by reason of his employment. The Commissioner therefore claimed that they fell within the post-employment defined benefit pension and, as a result, were taxable.
However, the AAT found that the payments were exempt from tax as they are “emoluments” within the meaning of the Act. Furthermore, it found that the immunity in respect of “emoluments” under the Act continued in force after the termination of the taxpayer’s employment and after performance of the services in respect of which the pension entitlement was granted.
(AAT Case AATA 155, Re Macoun and FCT, AAT, Ref Nos 2013/4274-4275, Tamberlin DP, 20 March 2014.)
[LTN 58, 26/3/14]